This is because about half of the software development cost incurs in Ukraine where 3000 Luxoft’s engineers work. Political protests have turned violent there. At least 25 people died after the government’s riot police tried to forcefully remove the protesters’ camps on the Independence Square in Kiev. Some commentators are now saying Ukraine may be lapsing into a civil war.

But under normal conditions, i.e., when currency weakness is not due to political unrest, a weak currency actually helps boost an exporter’s margin. Here are J.P. Morgan analysts Alexei Gogolev, Tien-tsin Huang and Puneet Jain:

About 48% of Luxoft development costs are in UAH as almost 3,000 engineers work in the Ukrainian offices. Another ~1,900 engineers are located in Russia (~32% of delivery headcount cost, based in RUB). Given there are no revenues coming out of Ukraine and only ~11% come out of Russia (large international firms like UBS and DB with exposure to Russia pay in RUB), weakness in both the Ukrainian and Russian currencies should support Luxoft’s margins.

Over 3Q14, Luxoft estimates that the weakness of the two currencies boosted gross margin by 50-70bps.

We increase our end-2014 PT to $50/share (from $40) and retain our OW rating as we believe current FX tailwind momentum is likely to further drive profitability.

So shareholders of Luxoft should hope a weaker hryvnia stays but the political turmoil goes.

Shares of Luxoft is down 2.2% this morning. Russian mobile telecom Mobile Telesystems (MBT) also has a sizable operation in Ukraine. MBT lost 3.7%. Gazprom (OGZPY), which routes through Ukraine to fulfill its European delivery obligations, retreated 3.4%. The Market Vectors Russia ETF (RSX) lost 1.5%.

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FEBRUARY 20, 2014 5:38 A.M.

Vlad Solodovnyk wrote:

Local software developers in the IT industry, while paid in local currency, have contracts with their employers listing their salaries in US Dollars - so they receive their salary monthly in local currency, at the interbank exchange rate of the local currency to the dollar contract amount. Therefore, local currency depreciation has little to no effect on costs of IT companies like Luxoft and others, as salaries are these companies' biggest costs by far. This is because software developers broadly work for the global IT market, and, as the alternative to working with software services providers, can work as freelancers in the global IT market, also for dollars.

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Emerging markets have been synonymous with growth, but the outlook for individual nations is constantly changing. Countries from Brazil and Russia to Turkey face challenges including infrastructure bottlenecks, credit issues and political shifts. Barrons.com’s Emerging Markets Daily blog analyzes news, data and research out of emerging markets beyond Asia to help readers navigate the investment landscape.

Barron’s veteran Dimitra DeFotis has been blogging about emerging market investing since traveling to India and Turkey. Based in New York, she previously wrote for Barron’s about U.S. equity investing, including cover stories and roundtables on energy themes. Dimitra was among the first digital journalists at the Chicago Tribune and started her career as a police reporter at the Daily Herald in the Chicago suburbs. Dimitra holds degrees from the University of Illinois and Columbia University, where she was a Knight-Bagehot Fellow in the business and journalism schools. She studies multiple languages and photography.